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The War Traders : 
An Exposure 

By 
George Herbert Ferris 



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THE WAR TRADERS: 



AN EXPOSURE 



BY 



GEORGE HERBERT FERRIS 



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NATIONAL PEACE COUNCIL. 
167, St. Stephen's House. Westminster, S.W. 

Telephone 6059 Victoria. 
PRICE TWOPENCE. 



2 



'•^rya/ B.J^^y\ . 



By the Same Author: 

A SHORT HISTORY OF WAR AND PEACE (Honw. 
University Library: Williams & Norgatb), Is. 1911. 

OUR FOREIGN POLICY (Melrose), 2s. 6d. net. 1912. 

GERMANY AND THE GERMAN EMPEROR (Mel- 
rose), 12s. 6d. net. 1912. 



HX) 



THE WAR TRADERS: 

AN EXPOSURE 



PREFACE. 

The substance of the following paper was read at the 
National Peace Congress, Leeds, on June 11, 1913. On 
the previous evening, in the House of Commons, in answer 
to a request that he would print lists of the larger Govern- 
ment contractors, Mr. Asquith had declined to satisfy what 
he called " a roving curiosity." It is so many years since 
my " curiosity " began to " rove " in this field that I should 
hardly have been drawn back to the subject at this time 
but for two considerations. 

The first arose from Dr. Liebknecht's revelations in the 
Reichstag, and the manner of their reception in this country. 
It seemed necessary to show that Germany has no monopoly 
of the evil here dealt with, and to state more emphatically 
than heretofore the chief corollary to the proposition so well 
argued by Mr. Norman Angell, that war does not, and as 
between great modern nations cannot, pay. War does not 
pay the nations. But war panics and preparations do, all 
the time and on an enormous scale, pay powerful groups 
of men in each nation ; and it may be doubted whether any 
real peace will be achieved till this association of political 
power and the private trade in arms is broken. 

Secondly, the Marconi trials and inquiry have set up 
new currents of critical thought. Men who differ in their 
view of this melancholy episode may yet agree in hoping 
that it may result in a generally higher standard of public 
duty. But if that end is to be attained, there will have to 
be a much wider inquiry into the connection between 
Parliamentary or administratrve power and private profit- 
making than has yet been attempted. 

Three motives meet, then, in the following pages — 
international peace, national economy, and purity of public 
life. 

I have sought to state the case in precise terms, and to 
exclude any statement as to fact that is not verifiable. 



221680 



Thanks to the reticence of siiccessive Govemmeuts and the 
companies concerned, parts of the subject are still " wropt 
in myst'ry." But indiscretions will occur, even in the best 
regulated businesses ; and some at these have been 
particularly enlightening. For the rest, I am indebted 
almost exclusively to the columns of the Times and its 
Financial Supplements, the Economist, and other financial 
journals, the "Stock Exchange Year book," the "Directory 
of Directors," " Who's Who," " Who's Who in Business," 
and other financial reference books, the varioue Army and 
Navy Annuals, certain company reports and balance-sheets, 
the Parliamentary debates, and several former panaphlets 
and articles of my own. 

Two series of articles which have appeared since this 
p^per was undertaken may be here mentioned, the one by 
" P.W.W." in the Daily News, where some points of the 
Mulliner episode have been more fu41y dealt with, and the 
other in the Labour Leader, by Mr J. T. Walton Newbold, 
who has analysed not only the directorships, but the lists 
of shareholders of some of the leading companies. The 
Investors' Review has also printed some of the share lists. 
This is a point upon which I have not entered in any detail.. 

June, 1913. 



I.— PATRIOTISM AND PROFITS. 

If tkere is one convention that overrides all others in 
Europe, it is that of the peculiar sanctity of the processes 
and apparatus of "national defence." In France the Army, 
in England the Navy, is the Ark of the Covenant. They 
represent not merely the prestige, glory, and honour of the 
Fatherland, but the very possibility of its existence. With- 
out them we cannot live. They are our bravest, purest, 
chivalry. The uniform and the flag cover tiiem as with a 
holy mantle. Governments, therefore, cannot make too 
solemn a face, citizens cannot make sacrifices too large, 
v;hen the need of strengthening this power of slaughter is 
declared by those in authority over us. This is the on];y 
Patriotism ; the man who dares to question it is a traitor 
to his country. 

We of the Peace Party have usually been content to 
describe this conventional Patriotism as a superstition, a 
slander on our own nature and that of our fellow men in 
other countries. But this is not the whole truth. Every 
superstition is based upon a trade ; and this is no exception 
to the rule. I propose in the following pages to attempt a 
brief scientific analysis of the trading interests (so far as 
they are visible in Great Britain) which underlie the 
patriotic superstition of our day. 

The arsenals, dockyards, and factories belonging to the 
State play a smaller and smaller part in the provision of the 
national armament. The great mass of this material — five- 
sixths of the new naval construction, for instance — is pro- 
duced by private firms. The chief armament companies 
registered in this country — those having a capital of more 
than a million sterling — are seven in number : 

Capital. 
£ 

1. Armstrong, Whitworth, & Co 9.512.000 

2. Vickers, Ltd 8,588.000 

3. Camraell, Laird, & Co 4,075,000 

4. Wm. Beardmore & Co 3,703.000 

5. John Brown & Co 3.573.000 

6. The Nobel Dynamite Trust 3,285.000 

7. Coventry. Ordnance Co 1,400,000 

These figures include £2,000,000 just added to the capital 
of Armstrong 'b, and £740,000 to that of Vickers', mainly 
for extensions and foreign branches.* 



•Details of these sums will be found in the Econemitt of April 26, 1913. 



There are many other firms — I. J. Thomeycroft and Co., 
with a capital of £607,000; J. S. White and Co., of East 
Cowes, who are building six ocean-going destroyers for Chile ; 
Whitehead Torpedo Works; Scotts, Ltd., of Greenock; the 
Birmingham Small /^rms Co.. the British South African 
Explosives Co., the Birmingiiam Metal and Munitions Co., 
Kynoch, Ltd. ; Curtis's and Harvey, etc. ; and, of course, 
firms like Harland and Wolff and Palmer's do much 
Admiralty work, while the Army contractors are too 
numerous to mention. Many of these com.panies do civil 
as well as military and naval business. It is impossible 
to distinguish between the capital used for the one and the 
other purpose; and it is, therefore, impossible to say how 
much pi'ivate money is invested in this country in the trade 
of war. But the seven chief firms alone have now a com- 
bined capital of about £34,000,000 (less some little 
duplication in the figures) ; and it seems not improbable 
that the total capitalisation of the British armaments 
business may be fifty millions sterling or more. The amount 
of new naval construction alone which was given to private 
contractors last year amounted to more than twelve million 
pounds sterling. 

The first thing to note, then, is the vast size and wealth 
of these concerns which flourish upon the nation's suffering, 
and suffer when the national burden is lightened. Most of 
them have done prodigiously well in recent years, especially 
since the anti-German scare of 1899. The Vickers and 
Armstrong firms alone have distributed about a million-and- 
a-half sterling in profits this year, and are increasing their 
capital by about 2f millions. Let me give some illustrative 
details. The shareholders of Armstrong, Whitworth, and 
Co., had this year, as the Times said, an " agreeable 
surprise," in the shape of " a 12^ per cent, dividend on the 
Ordinary, with a bonus of one share for every four previously 
held, which, at the current value of the shares is practically 
equal to 14s. per share. . . . This conversion of undivided 
profits into new capital shows that the directors take a 
confident view of the near future. . . . For the years of 
the present century, the dividend has never fallen below 
10 per cent., and on five or six occasions it has been as high 
as 15 per cent. ; and this comes after deducting 
nearly £90,000 for Debenture interest (not including 
the stock held by the Company itself) and £40,000 
for Preference dividend." These profits do not trench on 
a special reserve of £459,000; and they are in spite oh 
the large outlay in moving the principal works 
from Elswick to Walker-on-Tyne. Beside its British 
contracts, the company has had on hand during the past 



jear a battleship for Turkey, another for Brazil, and another 
for Chili, the last two being "larger and more powerful " 
than any British vessel built by the firm.t It is now, or has 
lately been, building also for Japan and Argentina. It is said 
that the company " supports 120,000 men, women, and 
children by the Newcastle-on-Tyne works alone — that is, 
about a third of the whole population."* 

At the annual meeting of Vickers, Ltd., on March 28, 
1913, Mr. Albert Vickers, the Chairman, was also able to 
congratulate the shareholders on "a successful year" at 
their Sheffield, Barrow, Erith, and Birmingham Works. 
In 1912 alone, the assets of the company increased by about 
£1,168,000. A dividend of 10 per cent, on the ordinary 
shares was declared (as in each of the past five years), and 
there was some complaint that it was not 15 per cent. 
It was also decided to issue £740,000 of new ordinary shares. 
The new automatic rifle-calibre gun of this firm has lately 
jeen adopted by five Governments. 

The third of the seven great firms, Cammell, Laird, and 
Co., of Sheffield and Birkenhead, has had a more chequered 
'career, partly because of a disastrous difference with the 
Admiralty and War Office in 1907, and partly because a 
large investment in the Coventry Ordnance Works did not 
turn out well. I shall refer to the enlightening history of 
the latter adventure presently. In the four years, 
1903-6, Cammell, Laird made net profits amounting to 
£833,000. Up to the latter year they had distributed for 
nine years dividends on the ordinary shares averaging over 
12 per cent. During 1907, certain mysterious " irregu- 
larities," of which no definite information was given, were 
discovered at the Sheffield Works, and the Company were 
struck off the lists of Army and Navy contractors. In order 
to secure reinstatement, the chairman and two managing 
directors resigned, and Government work was then recovered. 
This episode cost the Company a loss of £169,000 in 1907 
and 1908; and while, in the four subsequent years, profits 
have been made to the amount of £535,000, this has not 
permitted the distribution of any ordinary dividends. 

Of John Brown and Co., which is now engaged in 
building "the most powerful battle cruiser in the world," 
appropriately named " The Tiger," the Times remarks that 
" to have paid 7| per cent, for five successive years, in 
spite of labour troubles and increased working costs, is no 
mean achievement." 



t statement by Sir Andrew Noble, April 19, 1912. 
• Times Financial Supplement, March 29, 1913. 



II.— THE SHARING OF £73,000,000. 

The letter of Cammell, Laird's to the late Lord Tweed- 
mouth, appealing for reinstatement on the Admiralty List, 
naturally indicated the hardship falling upon the owners of 
four mi'Uions of share and debenture capital, and upon the 
15,000 men employed in works directly owned by the Com- 
pany. This class of investment is not commonly held in 
small quantities by poor people ; it is naturally a property of 
the well-to-do and the influential. In 1909 the Investors' 
Review examined the share lists of several armaments 
companies, and it found in that of Armstrong, Whitworth 
alone the names o'f 60 noblemen, their wives, sons, or 
daughters, 15 baronets, 20 knights, 8 M.P.s, 20 Military 
and Naval ofl&cers, and 8 journalists. Later lists show, 
among other things, a marked connection between arma- 
ments' share-holding and active membership of bodies like 
the Navy League. But let us look the facts in the face. The 
influence of this traffic does not arise merely from the 
wealth of its directors and the power they hold in Parliament, 
and the daily Press. Militarism is strong in England because 
Lazarus gets some poor pickings from the feast of Dives. 
We do not always realise that, while we have by far the 
most powerful Navy, the British Empire has also, upon 
the peace establishment, f'.e largest military force in the 
world, the Russian Army alone excepted. It now falls little 
short of a million men,* and when compulsory military 
service is fully developed in Australasia, it will considerably 
exceed a million. Of these, 725,000 are Britishers, 600,000 
of whom are located at home, and the remainder exiled 
mainly in tropical or sub-tropical lands. About 480,000 of 
them are liable for service in any part of the world in war 
time. To these must be added 185,000 men of the Fleet 
and its Reserves. The wages of the Navy and Regular 
Army amount to over £16,000,000 a year. 

Behind this foroe of 910,000 able-bodied and middle-aged 
Britishers of the two "services," there lie two bodies, also of 
adult men, mostly skiUed and able-bodied, of whose 
numbers we have no exact count: — (1) Those engaged in 
the arsenals and dockyards and in the works and factories 
of the armaments' contractors, and (2) Pensioners, small 
and large, possibly 100,000 of them, since their cost on the 
Estimates is about £2,500,000 a year. In the case of the 



• In Great Britrtin : Re^nlars, LSO.OOO ; ATmy Reserve 139,000 : Special Reserve, 
®,000; Territorial Force, 26S.000 ; total, 600,000. In India: British Regulars. 
78,000 ; Native Troops. 165.000 ; total, 243,000. In the ColonUi : British Regniars, 
47,000; Colonial MUitia (rapidly expanding under compulsion— eay) 100,000; total, 
147,000. Total 990,000. 

6 



Elswids Works, a small number of workmen have an 
interest in the sale of arms not only as wage-earners, but 
under a system of profit-sharing. On their deposits, a fixed 
interest of 4 per cent, is paid, plus a dividend equal to half 
the amount by which the ordinary dividend exceeds 4 per 
cent., but so that the total does not exceed 10 per cent. 
Thiis, if the ordinary share dividend be 10 per cent., the 
workman depositor gets 4 per cent, plus half of 6 per cent, 
equals 7 per cent. Of 16,000 employees at the end of 1911, 
only 2,788 came within this scheme, tieir deposits amount- 
ing to £241,788. 

The probability is that 1,500,000 adult able-bodied men — ■ 
which is equal to one in six of the " occupied " adult males 
of the United Kingdom — share to some extent in the 
£73,000,000 a year which "National Defence" now costs 
us. The "share" varies greatly, of course. The Territorials 
give in labour very much more than they cost in money; 
they are only included for the sake of completeness. As to 
the great body of the soldiers, sailors, and armament work- 
men, it is enough to say that they are nearly all compelled 
by poverty, and that, if they have come to see their own 
interests in the maintenance of this particular trade, it is 
not so much their fault as the fault of society at large. As 
a vast constituency favourable to prodigal expenditure on 
armaments, we cannot ignore them, although they get none 
of the big prizes of the war trade. 



III.— COMPANIES AND COMBINES. 

We may now examine more closely the character and 
methods of our seven chief firms. I suppose that, if asked, 
the average man would say they were seven independent 
busmesses, competing, in a patriotic spirit, for the patriotic 
work the Government gives them, and peculiarly subject to 
fluctuations of fortune according to the state of inter- 
national relations. Yet this answer would be far wide of the 
truth. They were once, indeed, independent businesses; 
they are now highly syndicated, and compete as little as 
possible. If they are patriots, it is in a new and singularly 
impartial kind — British on Monday, Eussian on Tuesday, 
Canadian on Wednesday, Italian on Thursday, and so on, 
as orders may be got from China to Peru. Finally, as we 
shall see, these are not the kind of men to wait upon the 
fortunes of political parties ; they make their own politics , 



they make their fortunes by moulding international rela- 
tions to their own will. 

Sir Andi-ew Noble, Chairman of Armstrong, Whitworth, 
and Co., recently spoke in public of the " keen rivalry " of 
the leading firms ; and, no doubt, competition continues 
within a considerable field. For instance, three British 
groups are preparing to exploit the patriotic sentiment that 
is now being so assiduously cultivated in Canada. The 
first, the Canadian Shipbuilding Company, is a subsidiary 
of John Brown and Co., with a capital of £2,000,000 
sterling, and works at Sydney, Cape Breton Isle, which will 
soon be able to turn out the largest Dreadnoughts. Secondly, 
Vickers Ltd. have incorporated a Canadian Company at 
Montreal, with a capital of a million sterling. And now we 
learn that Sir P. Girouard and Sir G. H. Murray have just 
returned from Montreal, where they have been buying for 
Messrs. Armstrong the site for large works on the South 
shore of the St. Lawrence. Again, the great firms are pre- 
paring to exploit the latest victory of man over Nature, 
aerial navigation, for the purposes of warfare. Messrs. 
Vickers are building naval airship works on Walney Island, 
Barrow, where a thousand or more men will presently be 
employed. Messrs. Armstrong are also entering upon the 
construction of military aeroplanes and airships. 

Things are not exactly what they seem in this sphere, 
and we do not know to what extent these concerns will com- 
pete. But the Trust tendencies in the armaments trade 
have long been known to the economic student. The 
process differs in different countries, in the case of this as of 
other manufactures. In England it has taken four main 
forms — the absorption of minor in major companies ; the 
creation by major companies of minor companies in strict 
tutelage to carry out special kinds of work ; the amalgama- 
tion or syndication of firms in associated branches of 
industry ; and the formation of syndicates which do not 
themselves manufacture, but hold the shares of different 
companies, and so effect a community of interests. Some- 
times these forms are mixed. Thus, in 1903, Messrs Cam- 
mell, Laird bought the Mulliner-Wigley Company, Ltd. 
Two years later, Cammell, Laird came to an agreement with 
John Brown and Co. and the Fairfield Shipbuilding Co., 
by which the subsidiary business was rechristened the 
Coventry Ordnance Co., a half of the capital being held by 
Brown's, and a quarter each by Cammell and Fairfield. The 
various kinds of interconnection which I have named are 
now a common feature in annual reports and shareholders' 
meetings. At this year's meeting of Vickers, Ltd., the 
Chairman said that " the subsidiary and connected com- 

8 



panies bad brought much profitable business to the Vickers 
Company, in addition to the satisfactory profits which tbey 
contributed as tbe result of their own direct working. That 
was, perhaps, especially true of foreign business." 

Tbe tendency towards Trustification was well known ; it is 
in the nature of ail great routine businesses of our day, and 
the only surprising thing revealed by careful search is 
the degree to which tbe process has gone. Tbe great body 
of tbe War Trade is now, in fact, a vast financial network, 
in which firms apparently independent are strengthened by 
absorption, and linked together by an intricate system of 
joint shareholding and common directorships. Thus, 
Vickers, Ltd. absorbed the Naval Construction Co., of 
Barrow, the Maxim-ISiordenfeidt Co., and the Electrical 
and Ordnance Co., Ltd. They hold half the share capital 
of Beardmores, and are directorially connected with Cam- 
mell, Laird and Co., Whitehead and Co. (torpedo manu- 
facturers), the Chilworth Gunpowder Co., the Harvey 
Armour-Plate Co., and other companies. Armstrong, 
Whitworth, and Co. absorbed Mitchell's Shipbuilding 
Works at Newcastle, and are directorially connected with 
the Whitehead and other companies. We have seen the 
connection of John Brown and Co., of Sheffield and Clyde- 
bank, with the Coventry Ordnance Co. ; they also hold most 
of the shares in Thos. Firth and Sons, armour-plate rollers, 
and a participating interest in Harland and Woltf ; they own 
the Clydebank Engineering and Shipbuilding Company, 
besides various mines and iron works, and are connected, 
through directors and debenture trustees, with Palmer's, 
Cammell, Laird, The Projectile Co., and other firms. 
Cammell, Laird, in turn, hold half the shares of the Fairfield 
Co., besides a quarter of those of the Coventry Co., and are. 
connected with Vickers, Ltd., and other firms. Last year's; 
balance-sheets stated the interest in subsidiary cox^-panies to| 
ai-uount to over four millions sterling in tiie case of Vickers, 
and two millions each in those of Armstrong's and Cammell, 
Laird's. 

In spite of this close inter-connection the convention of 

secrecy " is maintained. During the recent meetings of 

the Institution of Naval Architects in Glasgow, the principal 

works were practically closed to the visiting experts, on the 

ground that Government contracts were in hand. 



IV.— COSMOPOLITANISM IN ARMS. 

The most remarkable feature of this syndicated business 
is its foreign development. Very rarely a company moves 

9 



itself bodily over the frontier : tiius, the French Hotchkisa 
Company, registered m 1887, took over last yeaj 
the business of tike English Hotchkiss Company. 
But, generally 8i)eaking, the British flag remains 
an " asset," as wa« said on a famous occasion. 
The building of foreign battleships in British yards would 
be anomalous enough, if Imperialist patriotism were what 
it pretends to be. But what are we to say of the Continenteil 
yards of British firms, which exist only to defend our 
foreign " rivals," and do not even yield British labour its 
poor solatium? Looking down from tiie hillside of Pozzuoli 
over the Bay of Naples, the visitor is surprised that this 
lovely coast should be defaced by a red-brick pile with 
towering chimneys. It is the arsenal of the British 
Armstrong-Pozzuc^ Company, which employs four 
thousand men, and is the ck.iei naval supply source of 
Germany's second ally. ks the Ansaldo- Armstrong Com- 
pany of Genoa, the same firm has built two Dreadnoughts 
and several cruisers for Italy, and has built minor vessels for 
Turkey. Armstrong's also have an ordnance and sunaour- 
plate works in Japan; and they are part owners, with 
Vickers and John Brown and Co., of the " Hispana " Naval 
Construction establishment at Ferrol, a chief instrument of 
King Alfonso's ambitions and the pauperisation of the 
Spanish peasant. Vickers, Ltd., are also important con- 
tributors to the Italian Navy through the subsidiary com- 
panies, Vickers-Temi, Ltd., Odero of Genoa, £ind Orlando 
of Leghorn. 

One of the most extraordinary episodes of recent financial 
and industrial history is the latest rebuilding of the Russian 
Navy, in which British, French, German, Belgian, and* 
American firms have been and are new co-operating with 
the Russian Government — an exhibition of internationalism 
as striking, in its way, as the Peace Conferences at the 
Hague, which the same Tsar called into being to put an 
end to the race of armaments. Fifty million pormds 
sterling is the estimated cost of this new fleet, the authori- 
sation for which was extorted from the Duma a year ago. 
The capital is mainly found by French and other foreign 
investors ; the interest is paid by poverty-stricken Russian 
peasants and workmen. Now, it is to be noted that 
patriotism is more extreme in Russia than in England — 
that is to say, it is ultra-Nationalist and ultra -Protectionist ; 
it is also ultra-Clerical, and it is commonly associated wi'^ 
the giving and taking of bribes, but that is another story. 
The Russian Government has none of our British objections 
to the extension of State business; the more undertakings 
the Gt)vemment has under its thumb, the more oppor- 

10 



tunities of profit are there for the ruling bureaucracy. 
Therefore, it was decided that, altiiough foreign money and 
skill must be enlisted, they should be made as far as 
possible to serve the end of " the progressive creation of a 
national shipbuilding industry." So Vickers, Ltd. (who 
have just got the contract) are not to supply all the neces- 
sary guns, but to build a new gun factory under forms 
of a special company with a capital of £1,500,000. So, 
again, ships are not to be imported, but to be built by 
Russian labour, with Russian material, under foreign 
guidance. The first four Russian Dreadnoughts are now 
being thus completed, in St. Petersburg, under the super- 
vision of John Brown and Co. At Nikolaieff, on the Black 
Sea, two other battleships are being built by a Franco- 
Russian company ; while another is being built in a yard 
partly owned by Vickers, Ltd., who are also helping to 
supply the machinery of two of the Baltic vessels. Other 
machinery rs being supplied under the supervision of 
Messrs. Blohm and Voss, of Ha^mburg. Russia now makes 
most of her own armour-plate, but orders have been placed 
in America and France. In ordnance, the foreigner has a 
greater advantage, and Vickers and Armstrong are now 
anticipating substantial orders. 

The Times Engineering Supplement (June 25, 1913) has 
a significant editorial comment on these facts. In the old 
days, the masters of strategy held unmistakably " that a 
nation should keep its counsel and its materials for war 
alike to itself." This "established principle of secrecy" 
has been abandoned, and " the present interchange of ideas 
and traffic in war material between nations is a remarkable 
product of modern commerce and diplomacy." It is. 
" regarded with complete equanimity. Yet it involves what 
is perhaps the most momentous paradox of the age," 
namely, that material equipment of navies and armies may 
become more uniform, but superiority " will rest with the 
nations which conaider and assist the development of 
differences from established types " — a conclusion very 
comfortable for the "War Traders. 

Russia is potentially a wealthy country. At the other end 
of Europe lies the small and poor State of Portugal, des- 
perately struggling to maintain her new Republican institu- 
tions. With a revenue of only £16,000,000 a year, she 
has a debt of £180,000,000, and the Budget commonly 
fails to balance. Yet the Government of Portugal has been 
persuaded that she must have a new Navy, and that only 
British builders can save her. Accordingly, a " Portuguese 
Naval Construction Syndicate," almost wholly British in 
composition, has just been formed, and has got its first 

11 



contract of £1,500/000. It comprises the firms of John 
Brown, Cammell, Laird, the Fairfield Co., Palmer's 
Thorneycroft's, and the Coventry Ordnance Co.* 
Time was when Englishmen bled for Portugal ; now our old 
ally must bleed for us. So the weak pay for the patronage 
of the strong. 

These great enterprises raise some interesting questions. 
From time to time there is a mild scare about England's 
position ui the MediteiTanean ; and more frequently there 
is a demand for the strengthening of the land and sea 
defences of the road to India. Yet the only danger in this 
direction has been created by "patriotic". British capi- 
talists. Suppose for a moment that the war these patriots 
often imagine — the life and death struggle between the 
Triple Alliance and the Triple Entente — were to come about. 
These arsenals and dockyards would, of course, be seized and 
used against us. Sir Andrew Noble or Mr. Vickers would, 
perhaps, describe this as an absurd supposition. If tnat be 
so, what are they building Itahan Dreadnoughts for? If not 
against England, then against whom? Against our good 
friend, France? According to the " patriotic " theory, that 
would be much the same as building against England. Or 
against Tui'key? But the same firms show their impartiality 
even by using their Itahan yards to supply Turkey with 
warships she cannot use. Or against Spain? And at the 
same time they are providing Spain with a fleet to use, on 
this hypothesis, against the fleet they have built for Italy. 

Politically, this sounds midsummer madness; as a busi- 
ness afl'air, it is methodical and profitable in the extreme. 
You persuade one State — Italy, for instance — that she needs 
more big ships or a new field-gun. The next-door neighbour 
— France, for instance — must soon follow suit, and there 
will be more orders. Meanwhile, another neighbour — Spain, 
for instance — is easily persuaded that her African interests 
are in danger, and that the British Dreadnought is the only 
type of insjrance to meet the case. The pressure of business 
wiU now be transferred from Pozzuoh to Ferrol, and then 
round again. Or, to shift the scene, you find it, at a certain 
date, quite easy to persuade the Elder Statesmen of Japan 
that a modem Navy is necessary to their designs in China 
and Manchuria. Are you not the authors of Britain's 
might, and is not this the " Britain of the Far East "? All 
goes as you have foretold. But now Russia's humiliation 
offers her as an easy prey to your blandishments. Millions 
have a way of disappearing between the fingers of the 
Ministers of the Tsar. Tiiere have been nxmierous naval 



•The Economitt, May, 1912. 



scandals in St. Petersburg, in which foreign agents have 
sometimes played a singular part. At last, however, Kussia 
ii? getting her Dreadnought fleet, and Vickers and Brown are 
getting their profits. Let Germany look to her Baltic coast- 
line ! She looks to it ; and there is good business for Krupps, 
and the, Vulkan Works, and the Deutsche Munitions-und- 
Waffen Fabrik. Now the Nobles and Mulliners, the 
Robertses and Beresforda, are all agog. England resounds 
with the anti-German tocsin, and votes of censure are killed 
by giving new contracts to Vickers, Armstrong, Brown, and 
companies. Parliament and the Press talk of a political 
crisis : all that has really happened is the completion of a 
new cycle in the ceaseless propaganda of the war-traders. 
There are thousands of small transactions every year of 
which these large transactions may be taken as a very 
advanced type. For the best part of a century, England 
has freely spent money and life — we still spend many 
thousands of pounds yearly — in the effort to suppress 
slave raiders and slave traders in Africa and Asia, and to 
repel the attacks of tribesmen armed no longer with bows and 
arrows, but with modem rifles and cartridges. Where do 
these weapons come from? ,r,Who arms the hill-men of the 
Indian frontier, the road bandits of Persia who recently 
killed certain British officers ; who arms the slavers of the 
Gulf, and the Arabs of the Tripolitaihe, the Somalis and 
Abyssinians, the Albanians and Cretans, the Revolutionaries 
of South America, and the innumerable natives of inner 
Africa? Birmingham is not going to tell us the secrets of 
gun-running on the coast of Morocco. But this we know — 
that the British exports of fire-arms and ammunition (not 
including armour-plates and other large material) amounted 
in 1911 to £3,845,000, and that this "patriotic" trade is 
rapidly growing. We may be sure that, in this instance 
also, the curse of militarism comes home to roost. 



v.— MORE INTERNATIONAL EXAMPLES. 

The process of international trustification has gone further 
than I have yet indicated. How far we do not exactly know. 
In this, as in other departments of finance and manufacture, 
we are in a transition stage between that of really indepen- 
dent and competitive businesses, and of the all-embracing 
trusts of the future. The appearance of competition will be 
maintained as long as possible, because it is essential to the 
" patriotic " programme. " The war in the Balkans," says 

13 



the Economist (May 24, 1913), " has been, in one of its 
aspects, a competition between Krupp and Creusot, and the 
groups of bankers which support those eminent manufactur- 
ing concerns." There is no pretence here that the German 
firm is promoting German national interests, or that French 
pohcy will be aided by the success of Creusot "^'It is on both 
sides a mere matter of trade. But if Krupp and Creusot are 
real competitors, a little of the old illusion is still left. 

In the business of loan-mongering, which is the lubricating 
agent of the armaments trade, international combination is 
becoming more and more common and powerful- The case 
of the so-called Quintuple Loan to China is a current illustra- 
tion. Five Powers rally their financiers and organise them 
into a " pool " for the exploitation of the young Republic 
of the Far East. A British group outside this ofl&cial ring, 
led by the London and South Western Bank, attempts, as 
the Americans would say, to " butt in " by offering China 
what seem to be more favoiirable terms. The British 
Government resists it with all its force. Meantime, Aus- 
tria, which is not one of the five Powers, has been 
" jumping the claim." On April 10, 1913, agreements were 
signed in Pekin for two six per cent, loans, the one, of 
£2,000,000, in the name of an Austrian armaments firm, the 
Stabilimento Tecnico of Trieste, the other, of £1,200,000, 
in the name of a German firm, the Vulcan Works, Stettin. 
The two loans were negotiated as one transaction through 
the Austrian Legation, the terms being that about £1,500,000 
should be paid in cash in 45 days, the rest to be retained by 
the negotiating houses pending a purchase of torpedo boats.* 
What on earth does China want with torpedo boats, 
especially at the moment when she is under the protection 
implied in the Quintuple Loan? Well, there it is; and it 
illustrates well the present mixture of competition and com- 
bination in the armaments trade. For the moment, the 
money-lenders have rather overdone their part. Already 
pressed by the costs of the Balkan War, the Paris bankers 
are called upon to finance the Civil War in Mexico. " The 
Stock Exchange has been staggered," says the Economist 
(May 24, 1913), " by this last item of 20 millions sterling 
which the Mexican Government hopes to get, at a usurious 
rate, from French investors. . . . Can we wonder that 
capital is becoming scarcer and that many legitimate and 
highly-productive enterprises aU the world over are suffer- 
ing? " 

My own impression is that a wave of bad trade would 
expedite the process of trustification among the world's 

* Economist, May 24, 1913, citing the Pekin Correspondent of the Daily Telegraph. 

14 



providers of war tnatexial, for it would put still greater 
pressure on them to save the losses of competition. In his 
speech in ihe Beichstag on April 18, 1913, Herr Liebknecht 
claimed to have discovered the existence of an international 
armaments tnost for the sale of repeating rifles in Russia, 
China, and other countries. Tlie component firms were said 
to be combined for the fixing of prices in common, and to have 
a general committee for fixing accounts, for propaganda 
through common agents, for technical help through the 
exchange of drawings, models, and so on. The firms named 
were Austrian, German, and Belgium. Naturally, this did 
not strike the German public as did the case of the Deutsche 
WaSens-und-Munitions Fabrik, a company holding a leading 
^lare in French companies, and using its influence in the 
Paris Press to stimulate Franco- German competition in 
armaments. An analysis of the directorships and aflfihationa 
of the Nobel Dynamite Trust afiords no less remarkable an 
illustration of the cosmopolitan character which the modem 
war-trade is assuming. This British company, with its 
capital of £3,285,400, its net profits for 1911-12 of £381,900, 
and its regular 10 per cent, dividends, is a share-holding 
rather than a manufacturing concern. It is, in brief, an 
Anglo-German dynamite aUiance. It holds the entire share 
capital of the Nobel Explosives Co., Ltd., has seven directors 
on the British South African Explosives Company, and is 
similarly connected with the Birmingham Metal and Muni- 
tions Company, the Chilworth Gunpowder Company, and a 
number of other British firms. On the other side, it is 
interested in the Dynamite Action- Gesellsohaft, formerly 
Alfred Nobel and Co., of Hamburg, the Dresdner Dynamit 
Fabrik, and two other German explosives firms. The Trust 
itself has a board of fourteen directors, of whom half a 
dozen are Germans; while one of the subsidiary companies, 
the British South African, has four Germans and one 
Frenchman on its board. 

An even more extraordinary combination of British, 
German, French, Italian, and American firms has been in 
existence for the past decade — the Harvey United Steel 
Company. Although a dividend of 7^ per cent, had been 
paid in 1911, it was decided last year to wind the concern 
up — why, does not appear. It was registered in 1901 to 
amalgamate or control several companies holding the rights 
of the Harvey armour-plate patents. Other firms apparently 
came in afterwards. The managing director was Mr. Albert 
Vickers, chairman of Vickers, Ltd., with a holding of 2,697 
shares. Other directors were Mr. Beardmore, of Wm. 
Beardmore and Co. ; Mr. J. M. Falkner, of Armstrong, 
Whitworth; and Mr. C. E. Ellis, with a holding of 7,438 

15 



sliares, representing John Brown and Co., the Coventry 
Co., and Thos. Firth and Co. The chief American partner 
was the Bethlehem Steel Co., holding 4,301 shares. The 
chief French partner was the Schneider Company with 9,862 
shares. The combine had four French directors, two of 
whom held 2,000 shares each. This did not in any way 
prevent the collaboration of the two German armaments 
firms condemned in the Reichstag by Herr Liebkneckt, the 
Essen Company, holding 4,731 shares and having two 
representatives on the Board, the Diilingen Company having 
one representative and holding 2,731 shares. Finally, the 
Italian Terni Steel Company held 8,000 shares. Behind 
the manufacturers stood the bankers, the same extra- 
ordinary ainity prevailing. The house of Ernest Ruffer, 
with 6,169 shares, linked hands with the Boug^res Freres, 
of Paris (3,000j, on the o'ne side, and the Deutsche Bank of 
Berlin (1,350) on the other. In forty years all the Peace 
Societies have not succeeded in effecting such a Franco- 
German reconciliation as this. In the share-list, Mr. 
Newbold found the names of one British General and two 
Major Generals ; and "behind these were the shadowy 
figures of a vast host of Princes, Peers, Ministers of the 
Crown, soldiers, sailors, and clerics." A veritable Brother- 
hood in Arms. I cannot believe that the Harvey United Steel 
Company is reo'.ly dead. Somewhere it has surely had a 
glorious resurr jction ; under some metamorphosis, it surely 
lives and works to prove the pettiness of national prejudice, 
and the ease of forgetting such sores as Alsace-Lorraine, 
when mcu have learned the golden wisdom of "good 
business." 



VI.— A " PRIVATE AMBASSADOR " AT WORK. 

This information we owe to the mild rules of publicity 
imposed upon public companies in this country. Of the 
inner working of the armament firms in general, and the 
international combines in particular, we know very little ; 
but on several occasions the curtain has been lifted for a 
moment, with the most enlightening results. I will give 
some brief illustrations of how their agents scout for orders, 
of how their managers find their two great kinds of 
opportunity — an international crisis, and a great " scrap ' 
of war material — and of how they command the service of 
Governments, Liberal and Conservative alike. Let us take 
the lesser agents first. 

16 



On December 14 and 15, 1904, one Roberfe Lawrie 
Thompson, formerly a special con-espondent of the Times, 
took action in the Chancery Division, before Mr. Justice 
Warrington, against Sir W. G. Armstrong, Whitworth, and 
Co., Ltd., claiming an account and payment of commission 
and other sums alleged to be due from the firm or its 
predecessors, Armstrong, Mitchell, and Co., with regard to 
orders for warships and other war material from the 
Governments of Chile, China, and Japan, during the years 
1892-S. -aThe case is only briefly reported ; but the following 
details are given in the Tunes. After Mr. Danckwerts, K.C., 
had outlined the. plaintiff's case, Mr. Rufus Isaacs, K.C., 
fcr the defendants, said he was glad to be able to inform 
the Court that the parties had arranged terms of compromise 
which it was not necessary to state publicly. Proceedings 
were accordingly stayed, and who will doubt the wisdom 
of the great Armstrong firm? But, as the following state- 
naent was published without contradiction, its substantial 
truth may be taken as admitted, particularly as a former 
member of the staff of the Times was concerned. 

" It appeared," says the report, " that the plaintiff, from 
his previous avocation, knew a great many things that were 
going on in various parts of the world, and was personally 
acquainted with many foreign personages and officials in 
high position. His engagement with the defendant firm 
was not that of an ordinary commission agent ; his business 
was to find out what was happening in various foreign 
countries, to let his employers know what was likely to be 
required, and generally to prepare the ground for orders for 
warships and war material. His position, in fact, was some- 
what analogous, "said counsel, "to that of a private diplomatic 
agent or ambassador." This is credible enough. All foreign 
correspondents of leading journals have peculiar sources of 
information ; many of them have considerable influence in 
the countries where they reside. It is the pride of the Times 
to maintain something as nearly as possible approaching the 
status of a diplomatic service. De Blowitz in Paris and 
Dr. Morrison in Pekin are only two of the notable names 
in this hierarchy; and do we not know that Mr. Bourchier, 
the special correspondent of Printing House Square in the 
Balkans, was one of the authors of the Balkan Alliance?" 

From 1886 to 1897, then, Mr. Robert Lawrie Thompson 
was " private diplomatic agent or ambassador " for the 
Armstrong Company ; and up to September, 1894, he was 
also special correspondent of the Times, ceasing to act in 
the latter capacity " owing to a diti'erence of opinion on the 
political situation in the East." His first field of operations, 
in 1886, was Spain and Portugal; but " this did not turn 

17 



out a very profitable business." It was a very different 
world in 1886; the first modem navy scare — that of ]\Ir. 
Stead and Lord Charles Beresford — -had only just set going 
the great ocean race. Who knows? It may be the bread 
Mr. Robert Lawrie Thompson then cast upon the waters 
that is now returning in fat contracts to the Brown- 
Cammell and Armstrong- Vickers- Brown •combines. In 
1890 Mr. Thompson began to represent the firm in Argentina 
and Chile, "in which latter country," said counsel, "he 
had special advantages for obtaining orders." What the 
"special advantages" were, we are not told; but, appar- 
ently, the result was satisfactory, for in August, 1892, this 
remarkable commission arrangement was arrived at with 
regard to operations by the " private ambassador " both in 
South America and in further Asia: "2^ per cent, 
commission on the cost of hulls and engines of orders for 
war vessels for Chile ; 5 per cent, an orders for other war 
materials ; 1 per cent, on the hulls and engines and all war 
material ordered by China and Japan during plaintiff's 
residence there and for one year afterwards; £1,000 towards 
expenses." Mr. Thomps<Hi went to China in 1893. In 
February, 1894, he had a difference with Sir Andrew Noble; 
and six months' notice was given to terminate the contract. 
The misunderstanding was cleared up, however ; and the 
arrangement went on. In March, 1895, Mr. Thompson 
returned to England; and soon afterwards a subsidiary 
agreement was made by which, in addition to the one per 
cent, commission, he was to receive £3,000 a year for 
expenses for a period of a year and a half from the following 
August. He did, in fact, remain in the East for that period 
— till May, 1897; and it was in regard to sums outstanding 
under these agreements that he took action against the 
Armstrong Company. How much Mr. Thompson claimed, 
or how much Armstrong's paid, we do not know. It will be 
seen that there was to be at least £5,500 for expenses alone ; 
as the arrangement lasted so long, it is probable that the 
other payments were substantial. 

What is it in this story that shocks the mind of the 
ordinary peaceful citizen? Evidently businesses of the 
magnitude of those with which we are dealing must have 
their agents and travellers, open and secret. What vaguely 
moves our disgust is, perhaps, just this, that it should be 
necessary for a certain class of British manufacturers, for 
whom a peculiar degree of patriotism has been claimed, to 
maintain abroad a service of scouts whose profit depends on 
their power of inveigling smaller foreign nations (" half- 
devil and half-child," as tixe bard of empire called theml, 
into the deadly feuds and the abominable waste of the 

18 



"Great Powers." We know in our hearts that, m the 
case of these small States, the conventional arguments have 
none of the plausibility they have in England, France, or 
Germany. If Portugal is in danger, two or three battle- 
ships cannot save her. China no more needs torpedo craft 
than Canada needs Dreadnoughts The only reality on 
which such a trade can be based is the readiness for violence 
which seems to exist in and between certain South 
American States. Civil war or international war, no matter 
— the agent of some British Trust stands at the elbow of 
the rival freebooters, and his trade depends upon their 
savagery. We are parties to solemn treaties closing large 
parts of the earth to the traffic in arms. We keep gunboats 
here and there to repress this illegal traffic. At the same 
time, arsenals and dockyards inseparably bound up with 
the British State are carrying on a larger traffic essentially 
of the same character. All over the world the name of 
England is being thus damned, in the eyes of the peoples 
and posterity, as the supreme exemplar in the arts of homi- 
cide. The iniquity of dumping opium upon a reluctant 
China has at last been most practically recognised. When 
shall we see that the trade in big guns and high explosives 
is equally a trade in poison? 



VII.— IS IT COERUPT? 

Whether in a more limited sense it is a corrupt trade is 
a question we can hardly overlook at the present moment, 
but it is altogether a subordinate question. During his visit 
to South America in 1911, M. Clemenceau declared that 
French guns were beaten by German guns in Argentina, not 
because of their superior make, but by the more liberal 
bribes given by German agents. I have listened in Con- 
stantinople and St. Petersburg to astonishing tales, and 
travellers familiar with Portugal and Spain, Italy, and 
China could probably cap them. In some of these countries 
bribery is the rule rather than the exception. That, 
happily, cannot be said of England. But corrupt practices 
are still so prevalent as to have led recently to the estab- 
lishment, under the presidency of Sir Edward Fry, of a 
" Secret Commissions and Bribery Prevention League," the 
purpose of which is to secure the full administration and 
the strengthening of the Prevention of Corruption Act, 

19 



1906.* It appears that the War Office has expressed its 
sympathy with the work of the League, and the Admiralty 
has shown its zeal by forbidding the sale in canteens of any 
kinds of goods with which prize coupons are given away I 
The League has had before it cases of " alleged bribery of or 
by . . . army agents . . . canteen managers . . . company 
secretaries . . . Government officials' . . manufacturing 
engineers . . . metal merchants, military contractors, and 
naval contractors." Although the secrecy maintained by 
the Admiralty and War Office with regard to their lists of 
contractors is calculated to give an unfavourable impression, 
I know of no evidence that the armaments trade is more 
liable than any other to the petty forms of this evil. 
As I have said, we do not know what were the " irregu- 
larities " which crippled Cammell, Laird and Go. in 1907; 
but the punishment was a heavy one. And, in a higher 
sphere, the Netheravon case,! like the Marconi case, sug- 
gests that, at least whenever Party interests can ue served, 
a dubious transaction is likely, sooner or later, to attract 
public notice. Sensational as these incidents may prove, 
their importance is small in comparison with the normal 
and accepted conditions of the trade in arms. The tongue 
of scandal wags if a Minister sells a piece of land to the 
Government in which he holds a place, or buys a piece of 
land from a fellow Minister or a Parliamentary supporter. 
But the purchase of warships, guns, ammunition, and other 
supplies from companies in which friends, relatives, and 
supporters of Ministers are managers, directors, or share- 
holders is part and parcel of the British governing system. 
Powerful associations, many of whose members are share- 
holders, exist to foster, if not the trade directly, the par- 
ticular superstition on which this trade thrives. It is, 
apparently, quite in order for a director of one of these com- 
panies to demand, from his place in the House of Commons, 
greater expenditure, some of which will go into the pockets 
of his firm. It is not simply in order, it is proof positive 
of patriotism, that the leaders of a great Party should set 
themselves to create a cloud of panic that will presently 
burst in a blessed rain of dividends among their followers. 



• In commending the work of the League, the txineii spoke of this evil as " a 
canker that has eaten deeply into the commercial integrity of which this cou«>try 
is justly proud." See " The War Against Bribery," by the Hon. Secretary, 
Mr. R. M. Leonard. The League's Offices are at 8 and 9, Queen Street Place, 
London, E.G. 

t In 1899, Sir Michael Hicks-Beach's Netheravon estate, on Salisbury Plain, 
was purchased by the War Office, with the assent of the Treasury. Sir Michael 
was at the time Chancellor of the Exchequer, and therefore left the management 
of the matter to Mr. Balfour iind Mr. Goschen. The net rental of the 7,817 acres 
was £2,629, and thirty-flve years' purchase was given. The valuation for death 
duties was £43,0.37, the actual purchase price £93,411. 



20 



It is to this class of fact, rather than to any possibility of the 
pettier kind of corruption, that I wish to draw the reader's 
notice. 



VIII.— " MOST VALUABLE ASSISTANCE." 

Is it, perhaps, as a guarantee of purity of administration 
and perfect integrity that the boards of the companies 
and combines are packed with representatives of what, for 
brevity, I may call the governing and decorated classes? 
Take Armstrong, Whitworth's, for instance. The Chair- 
man, Sir Andrew Noble, is a Baronet and Knight Commander 
of the Bath, Commander of the Order of Jesus Christ 
of Portugal, Knight of the Order of Charles III. of Spain. 
Grand Cross of the Crown of Italy, First Class of the Sacred 
Treasure of Japan, and he also caiTies Turkish, Chinese, 
and Brazilian honours thick upon him. Need I add that 
this Cosmopolitan " patriot " is a Conservative and a Tariff 
Eeformer? To balance matters a little, the Vice-Chairman 
is the Right Hon. Lord Rendel, formerly friend and host of 
"William Ewart Gladstone, and father-in-law of Henry Neville 
Gladstone, who is also a member of the Armstrong Board. 
Other directors are Sir G. H. Murray, G.C.B., P.O., I.S.O., 
who was private secretary successively to W. E. Gladstone 
and Lord Rosebery, and was Permanent Secretary of the 
Treasury from 1902 to 1011 ; Col. Sir Percy Girnvard, 
R.E., K.C.M.G., D.S.O., who was Governor of Northern 
Nigeria till 1909, and Governor and Commander-in-Chief of 
British East Africa thence till last year; Rear-Admiral 
Sir Charles Ottley, K.C.M.G.. M.V.O., formerly British 
Naval Attach^ in the United States, Japan, Italy, Russia, 
and France, Naval Assistant Secretary of the Defence Com- 
mittee in 1904, from 1905 to 1907 Director of Naval Intelli- 
gence, and thereafter Secretary of the supreme war-board 
of the Empire, the Committee of Imperial Defence. At the 
last annual meeting of the Company, Sir Andrew Noble 
spoke gratefully of the " most valuable assistance " of these 
gentlemen; and, indeed, " most valuable " it must be, for 
there could hardly be found three men carr;\'ing with them a 
completer knowledge of the inner working of the British 
Government, to say nothing of their ]iersonal influence and 
capacity. Among the trustees for the debenture holders of 
Armstrong's stand Earl Grey, formerly Governor General of 
Canada, and the Hon. Alfred Lyttelton, K.C., formerly 
Colonial Secretary, and an active member of the Front 
Opposition Bench. 

The other companies approach as near as they can to this 

21 



remarkable achievement. Lord Aberconway, a prominent 
Liberal peer, is chairman of John Brown and Co., which 
includes on its board two distinguished officers, Lieut. -Col. 
G. S. Davies and Captain Tressider, C.M.G. Lieut. Sir A. 
Trevor Dawson, formerly of Woolwich, ie one of the managing 
directors of Vickers, Ltd., of which Sir Vincent Caillard, the 
distinguished financier who has so often been engaged in 
special political duties for the British Government, is also 
a dh:ector. The Hon. H. D. Maclaren, M.P., Lord Aber- 
conway 's eldest son, is a director of Palmer's. Lord Pirrie, 
chairman of Harland and Wolff, is also a debenture trustee 
of John Brown and Co., of Thomas Firth and Co., and of 
the Coventry Ordnance Co, Lord Eibblesdale is a director 
of the Nobel Dynamite Trust. Sir A. T. Hadfield, another 
Liberal, is chairman of the Hadfield Foundry Co., Ltd. Lord 
Balfour of Burleigh is a debenture trustee of the Coventry 
Co., and of Beardmore's, of which the Marquess of Graham 
is a director. Mr. S. Roberts, M.P., is a director of Cammell, 
Laird, and Co. Admiral Lord Charles Beresford, K.C.B., 
M.P., is chairman of Henry Andrew and Co., manufacturers 
of steel for armaments. Admiral Sir G. Digby Morant, 
K.C.B., formerly superintendent of Pembroke and Chatham 
dockyards, is a director of the Fairfield Co. Admiral Sir 
Cyprian Bridge, G.C.B., formerly Director of Naval 
Intelligence, is a debenture trustee of Thomey croft's. 
Admiral Sir Archibald Douglas, G.C.V.O., formerly a Lord 
of the Admiralty, is a director of Hadfield and Co., Palmer's, 
and Richardson, Westgarth's. General Brackenbury, C.B., 
K.C.B., G.C.B., K.C.S.I., formerly Director of Military 
Intelligence, and Director of Ordnance at the War Office, is 
director of the Hadfield Foundry Co. Lord Sandhurst, 
G.C.I.E., twice Under-Se-cretary of War, is, or was, a deben- 
ture trustee of Vickers. Major-General S. Nicholson, C.B., 
formerly Assistant-Director of Artillery at the War Office, 
and Colonel-Commandant of the Royal Artillery, is chairman 
of the board of the Guncotton Powder Co., Ltd., where his 
past experience should surely prove " most valuable." 
Major-General Micklem, R.E., is a director of the King's 
Norton Metal Co. The Hon. H. C. L. Holden, C.B., 
formerly head of the Royal Gun and Carriage Factories at 
Woolwich, retired from the Royal Artillery this year, is a 
director of the Birmingham Small Arms Co., Ltd., of which 
Sir H. Rogers, ex-Mayor of Birmingham, is chairman. And 
so on. It is not suggested, of course, that the debenture 
trustees named have directorial powers; but their position 
as financial watchdogs is significant. 

The tradition of a passage to and fro between high Govern- 
ment posts and the direction of the contracting companies 

22 



has ansen gradually, though its recent extension has been 
rapid. In 1863, the first great naodem warship designer, 
Sir Edward Reed, was called from private work to be head 
of the construction department of the Admiralty. After 
" opening a new epoch " there, and giving the world many 
interesting examples, he retired in 1870, and joined Sir J. 
Whitworth in his ordnance works. Afterwards, he became 
chairman of E-arle's shipbuilding works at Hull, and directed 
the construction of warships for a number of foreign Powers. 
Sir W. H. White, having been in the construction depart- 
ment of the Admiralty from 1867 to 1883, then undertook 
the organisation and direction of the warship building 
department of Armstrong and Co. In 1885, after the Stead- 
Beresford scare, he returned to the Admiralty as Chief 
Constructor, remaining till 1902, when he received a special 
grant of money from Parliament in recognition of his 
services. His successor was Sir Philip Watts, who had been 
baval architect and director of the warship building depart- 
ment of Armstrong's from 1885 to 1901. 

What do these facts imply? Firstly, that these im- 
mensely-wealthy artd powerful companies and combines are 
entrenched firrrily, perhaps irremovably, in the governing 
class of Great Britain and its dependencies. Their forty or 
fi-fty or sixty millions of capital largely belong to this class, 
many members of which would be gravely injured by any 
arrest of the competition in armaments ; and millions of 
yearly dividends, beside salaries, directors' fees, and trustees' 
honoraria are distributed largely within this class, creating, 
consciously or unconsciously, in it the permanent temper of 
militarism in which our " service " Estimates are conceived 
and carried. 

Secondly, that they command the kind of skill and special 
knowledge which is popularly supposed, and surely ought, 
to be the exclusive property of the Government. Upon 
that kind of skill and special knowledge the safety of thei 
kingdom and the empire is supposed to depend ; yet we see 
it being offered like any common commodity to, and bought 
by, companies increasingly cosmopolitan in character, com- 
panies constantly buildi-ng for foreign purchasers, building in 
foreign yards, partners with German, French, Italian, and 
other manufacturers. Much of this special knowledge was 
once secret information, obtained in the very highest and 
most strictly-guarded recesses of the Government service. 
All the Members of Parliament at Westminster cannot 
persuade Sir Edward Grey to subject his department to the 
gaze of a responsible Foreign Affairs Committee ; but Secre- 
taries of the Treasury, Colonial Governors, dockyard superin- 
tendents. Directors of Naval and Military Intelligence, high 



Army and Navy officers, and even Secretaries of that sanctum 
sancioru-nt , the Imperial Defence Committee, are perfectly 
free to carry the experience they have thus confidentially 
gained at the cost of the State into the service of an 
abominable private trade. That seems to me a scandal 
beside which the Marconi affair and other affairs of the kind 
pale into insignificance. 



IX.— ECONOMICS OF A NAVAL " SCEAP." 

The fact is — and this is the upshot of the whole matter — 
the British Government, perhaps the strongest in the modem 
world, is powerless before the monstrous array of interests 
which I have superficially examined. I said that its two 
great opportunities lay in the " scrap " and the " scare." 
We have become so much accustomed to the " scrapping " 
of machinery in productive industry that what is politely 
called " the progress of invention " is accepted as inevitable 
in the trade of armaments also. Few men stop to think of 
the essential difference between a new and ultimately 
cheaper process of spinning cotton, or building high struc- 
tures, or refining metal, or transporting corn, and a new and 
for ever more expensive type of warship, cannon, rifle, or 
ammunition. In the former case, the ordinary course of 
commercial competition secures a real gain, in which the 
public has some share ; the inventor fails unless he can give 
a better or a cheaper result than that already existing. Even 
in the world of luxury, a relatively limited sphere, there is 
usually something of beauty or amenity to compensate for 
much waste. The business of armaments alone is pure 
waste, and pure waste upon an ever-extending scale. 

Why ever extending? One answer to this question is 
that, although it is the chief concern of Governments, the 
provision of armaments is not a Government monopoly, but, 
for the most part, a private trade. As such, it has these 
great advantages over other trades in the exploitation of 
inventions — the cost is practically immaterial, since there is 
a national purse to dip into; there is no question of securing, 
as every other invention must, a cheaper or more publicly 
profitable commodity; and there is no visible end to the 
process of " scrapping." All you have to do is to invent a 
more deadly weapon, and then play upon the fears, real cr 
assumed, of every Government for every other Government. 
" Humanity? " Rubbish, my dear sir, this is the Trade of 
Death, and no nonsense about it. " Patriotism? " Read 

24 



the life of Eobert Whitehead, the inventor of the modem 
torpedo, and consider other instances I have set forth. Con- 
sider the stake : we are not dealing here with paltry 
thousands, but with millions and scores of millions. 

Even a sketch of recent " scraps " and scares would 
require a substantial volume. There are two central points 
of interest — 1884 and 1905. The former is the year of the 
Navy panic created by W. T. Stead, Arnold Forster, and 
Admiral Lord Charles Beresford. It led to a whole series 
of great shipbuilding programmes, and greatly stimulated the 
Imperialist reaction culminating in the South African war. 
Every new step of successive First Lords — Lord George 
Hamilton, Lord Goschen, Lord Spencer, Lord Selbome, 
Lord Cawdor, Lord Tweedmouth — was going to be the last. 
Goschen was the great plunger : in five years he brought up 
the naval charges from £19,500,000 to £31,500,000 a year. 
During one debate he pooh-poohed Lord Charles Beresford 
as an " irresponsible person." The caustic reply was that 
" the Government has done everything, or nearly everything, 
that I have wanted them to do for years past. " Lord Charles 
added a distinctly naughty story of a certain First Lord who 
declared one day that "if he had a couple of millions for 
the Navy he would not know what to do with it, but shortly 
afterwards came down to the House and said that if he did 
not have six millions we should lose the Empire." So far, 
we had been, ostensibly, building against France and Russia. 
In 1904, Lord Selborne brought the Navy Estimates up to 
£87,000,000, though the Russian fleet had been destroyed 
and the Anglo-French Agreement concluded. 

Then came Admiral Sir John Fisher's great "scrap," 
the philosophy of which is explained in an appendix to the 
Estimates of 1904-5. A new and shorter estimate of the 
effective life of warships was adopted which condemned 
most of the vessels recently built as worthless. In twenty 
years, we had spent about £450,000.000 in the vain effort 
to establish a maritime despotism. In five years, the cost 
of the Navy had doubled ; in twenty years, it had quadrupled. 
We had not fought a single considerable naval battle in that 
period; yet the greater part of a sum which would have 
sufficed to establish old-age pensions and industrial 
insurance in perpetuity without further charge was now 
represented only by scrap-iron. The whole classes of 
" protected " and " unprotected " cruisers were condemned 
as practically useless, except for " police " purposes, a 
verdict affecting 115 vessels, which had cost between 
£35,000,000 and £40,000,000. Of these, 34 vessels were 
only five years old. The 38 cruisers of Lord George 
Hamilton's 1890 programme, and all of the same type for 

25 



which Ix)rd Goschen and Lord Selborno were afterwards 
responsible, were dismissed to the scrap-heap. 

You may suppose that such a lesson as this could not 
Boon or easily be forgotten. If so, you do not realise what 
it is to live under a tradition that we must give everything 
the Admiralty and its contractors ask for. The mass of 
toilers, who do not read Parliamentary reports or State 
papers, never heard of Lord Fisher's great " scrap," or 
never understood it. The "governing classes " understand 
it — otherwise. For them it was really the preparation for 
a new start, a Spring cleaning of the Whitehall Casino in 
readiness for a new gambling season. The sacrifice of old 
ships should have resulted in a large economy. The 
memorandum announcing it stated that £4,500,000 a year 
would suffice for their replacement. Yet the next vote for 
new building was £11,500,000. 

Next there appeared the new portent, the Dreadnought, 
laid down on October 2, 1905, and out at sea a year later. 
In whose brain this colossal slaughter-machine was 
Conceived, we do not know; we only know that it was a 
British brain — no foreign enemy jealous of our power or 
possession put this threat upon us — and that many 
millions have been paid to private traders to duplicate and 
still further improve it. At a stroke, the competition of 
navies, of which we bear the heaviest cost, was, by our 
action, lifted to a yet higher and costlier plane. The United 
States followed suit in 1906, Germany in 1907. Pre- 
Dreadnought types now scarcely counted. Large classes of 
ironclads and cruisers recently built were again rendered prac- 
tically obsolete. A few months before, most of them had been 
officially given an effective life of from 15 to 22 years. What 
this new scrap-heap represents in cash — otherwise, in lost 
labour — it is hardly possible to say, perhaps £70,000,000 or 
£80,000,000. The sequel is fresh in all our memories. 
Dreadnoughts have developed into Super-Dreadnoughts. 
The original of the type had a displacement of 17,000 tons; 
they are now building to 29,000 tons, and the cost is in 
proportion. Thirty of these monsters have been or are 
being built, at a cost of seventy or eighty millions sterling. 
Now, the aeroplane and airship threaten to revolutionise 
warfare ; and experts are talking of an altogether new type 
of warship, driven by gas or oil fuel, with internal com- 
bustion engines, which will abolish the existing type of 
vessel. 

Such is the punishment to which science dooms human 
folly. Invention and large-scale production govern the 
making of the machinery of manslaughter as well as oi 
useful commodities. But with what a different result ! It 

26 



is an automatic multiplication of evil. Every step in the 
increase of armaments is bad in itself, but it is worse in 
leading to a new stage of still greater waste and provocation. 
Yet all the forces of Gk>vernmental power and trading 
interest go to stimulate the process. What a satire it is on 
our claim to be an enlightened people that the only great 
manufacturing business the direction of which we entrust 
to the State is the one which is a perfect embodiment of 
the worst human passions, and the most elaborate system 
of organised waste ever conceived by the wit of man ! 



X.— HISTOEY OF A GREAT SCARE. 

" We have been hasty in the scrapping of cruisers," says 
the Navcd Annual for 1912. But what would you? The 
War Traders must live ; the Government has allowed a vast 
interest to grow up of which it is no longer master. The 
theory of the matter we take to be that the State arsenals 
and dockyards are kept up only sufficiently (1) to afford a 
means of floating new types and testing contract prices and 
qualities, and (2) to permit of the necessary expansion in 
time of war. We really depend upon Armstrong's, Vickers, 
and the rest. I have said that many of these firms carry 
on other branches of manufacture. They have laid down 
enormous plants ; they are continually engaging more 
capital, establishing new factories, enlarging their lists cf 
workmen. They have every reason, even in prosperous 
times, for attempting to cajole or coerce the Government 
to give them new orders. We have seen something of the 
political influence they can command ; and we have the 
evidence of Sir Robert Chalmers before the Estimates 
Committee of 1912 that Treasury control, always limited, 
" in the case of the Army and Navy is very small indeed as 
regards material and contracts generally — contracts for the 
building of ships, the purchase of guns."* But imagine the 
position of these companies when trade is depressed, or 
when, for any reason, they are individually suffering a slack 
time. We may be sure that every nerve is then strained 
to obtain Government work; and, if the easiest and most 
effective argument is an appeal to international jealousy 
and fear, are we not properly punished for our credulity? 
To give the devil his due, the system in which Patriotism 

• Pp. 277, Question 30.— Asked whether the Treasury had any expert means of 
checkinp the cost of Army and Navy contracts. Sir Robert Chambers replied: 
" None whatever." The Admiralty itself " have practically the wliole control." 
— Questions 73 and 89. 

27 



is the means and Profft the end is much older than the 
present generation of armament contractors. They have 
but bettered an ancient tradition, one that will last as long 
as the servility of the people. The offence which led to the 
downfall of Mr. H. H. Mulliner was not that he raised a 
baseless s«are, but that, his success having benefited other 
companies rather than his own, he overstepped all discretion 
in his complaints. 

Briefly, this is the story : In 1905, Mr. Balfour's Govern- 
ment was in power, and the prospect for the armaments 
trade, under the new conditions introduced by Lord 
Fisher's great " scrap," was of the best. In June, the 
Coventry Ordnance Company wa^ established, in the manner 
already described; and, in the following month, speaking 
at the annual meeting of the chief parent firm, John Brown 
and Co., Sir Charles Maclaren was reported as " expressing 
pleasure that Sir John Fisher was determined to go on 
building battleships, because that was certain to bring more 
work to their company." In December, however, Mr. 
Balfour resigned; and in January, 1906, the Campbell- 
Bannerman Gx)vernment was confirmed in its place by the 
most emphatic verdict recorded in any modern General 
Election. The very completeness of the rout may have 
suggested to the energetic and resourceful mind of Mr. 
H. H. Mulliner, managing director of the Coventry Ordnance 
Company, the need of a campaign independent of the dis- 
credited Tariffists. 

The " Diary of the Great Surrender," which Mr. Mulliner 
himself afterwards published {Times, Jan. 3, 1910) con- 
tains these two entries, which practically cover the period 
of the campaign: — 

" May 13, 1906, Mr. Mulliner first informs Admiralty of 
preparations for enormously increasing the German 
Navy. (This information was concealed from the 
nation until March, 1909)." 

" March 3, 1909, Mr. Mulliner, giving evidence before 
the Cabinet, proves that the enormous acceleration 
in Germany for producing armaments, about which 
he had perpetually warned the Admiralty, wa?! an 
accomplished fact, and that large quantities of naval 
guns and mountings were being made with great 
rapidity in that country." 
For three years, in fact, Mr. Mulliner gave himself to 
the work of propagating the myth of a gigantic expansion 
of Krupp's works, in particular, and German acceleration 
in general. It was an underground campaign (the indis- 
cretion came afterwards) ; but we gather from thp subsequent 

28 



Tetters and speeches* that Mr. MuUiner's " information," 
Bent first to the War Office in May, 1900, was " passed on 
to the Admiralty," " was discussed by them with several 
outsiders," and then " passed from hand to hand so that 
hundreds have read it." Of this "information," 1 need 
Qow say nothing more than that, as soon as it became public, 
it was emphatically contradicted by Messrs. Krupp, through 
Mr. John Leyland, M.P., and other correspondents, that, 
after some years it was practically admitted by the Govern- 
ment to be false, and that time has proved that it never 
had any real basis. It was, nevertheless, propagated with ( 
unremitting zeal, in forms more and more lurid, and with I 
the gradual assent of the leaders of the Opposition. But ( 
plans and proposals made by the Coventry Works to the \ 
Admiralty were apparently rejected in 1907 and 1908. 

In April, 1908, Sir Henry Campbell-Bannerman was 
succeeded by Mr. Asquith, and the Ministry was recon- 
structed, with Mr. McKenna at the Admiralty. The new 
pombination was far from being suspected of " Little , 
Pnglandism " or a slavish regard for peace and economy; 
but it was considered to have great personal strength. 

In the following autumn, Mr. Blatchford opened his 
incendiary campaign in the Daily Mail. At the same time, in 
November, 1908, Mr. Mulliner, according to his own account 
of the matter, "was fortunate in obtaining a hearing from 
one of our greatest generals " — presumably Lord Roberts, 
who, in the House of Lords on November 23, prophesied 
" a terrible awakening in store for us at no distant date." 
Mr. Mulliner attributes to this powerful aid the subsequent 
surrender of the Government to the scare-mongers. 

We have now reached the crisis of March, 1909. On the 
3rd of that month occurred the extraordinary incident of 
Mr. MuUiner's solemn reception by the supreme governing 
body of the Empire, the Cabinet in Council assembled at 
Downing Street. Ten days later, the statement explanatory 
of the Navy Estimates was published. It showed a total 
of £35,142.700 for 1909-10, an increase of £2,823,200, new 
construction accounting for an increase of £1,340,000. This 
was to allow for the building of four Dreadnoughts and other 
ships; and the Government asked for power to build four 
other Dreadnoughts contingently on its fears of German 
acceleration being justified. The Estimates themselves, the 
discussion of them on March 16 and subsequent days, the 
attitude of the Opposition leaders, and the after-action of 
the Government, all bear strong marks of the secret cam- 

• MuUiner's owa communications (Times, August 2 and 16, September 21, 
December 14 and 17, 1909; January 1, 3, 6, 7, 8, 12, 15, and 18, 1910); a speech at 
Bedford (Times, December 20, 1909) Mr. M'Kenna (Times, January 7 and March 
17, 1910) ; Mr. Duke, K.C., M.P., and other speakers in the Estimates discussion on 
March 16, 1910. 

29 



paign ot untrue intormation on which Mr. Mulliner and his 
friends had been engaged for three years. Mr. Balfour per- 
formed prodigious feats of imaginative calculation as to 
Germany's future Dreadnoughts. The Government had 
foretold 17 for March, 1912. Admiral von Tirpitz told the 
Budget Committee of the Reichstag (on March 17) that 
there would be only 13 in the Autumn of 1912. Mr. Balfour 
declared they would have 25, or, in any case, 21, in March, 
1912. This " danger point " being long past, we can now 
test the various prophets by accomplished fact. Admiral 
Tirpitz has been fully justified by time: Germany had, in 
fact, only nine Dreadnought battleships and cruisers on 
March 31, 1912, and only 14 on March 31, 1913. The British 
Government calculated 17 for March, 1912; this number 
is now expected to be reached in March, 1914!* As for 

Mr. Balfour's estimate of 21 or 25 ! 

But we anticipate. However incredible it may now seem, 
in March, 1909, the untrue information first floated by Mr. 
Mulliner, of the hitherto-unfortunate Coventry Ordnance 
Works, purveyed by him to the aforesaid famous general, 
to Mr. Balfour, Lord Cawdor, Mr. Lee, and a number of 
other M.P.s, including Mr. Sam Roberts, of Sheffield, his 
" former co-director " in Cammell, Laird's, and above all, 
to the Cabinet itself ; then purveyed by all these gentlemen, 
in various degrees and forms, to Parliament and the Press — 
this information swept the country off its feet. Croydon was 
carried triumphantly on the cry: " We want eight, and we 
won't wait." Mr. Balfour's vote of censure was rejected; 
but Ministers had accepted the grave (as the event proved, 
the shameful) charges against the German Government, and, 
as the "Annual Register" says, "All but the extreme 
economists were silenced." On July 26, Mr. McKenna 
announced that the four " contingent " Dreadnoughts would 
be laid down forthwith. 

One of the first new contracts was given to Cammell, 
Laird, and at a meeting of the Company, in which Mr. 
Roberts, M.P., took part, " there were," according to the 
Times, " many expressions of sympathy with the directors, 
and admiration for their work." But what of Mr. Mul- 
liner 's own concern, the Coventry Ordnance Works? It 
was constantly in evidence during the scare, chiefly by heck- 
ling questions in the House as to whether it was receiving 
orders, and, if not, why not. Apparently it was still not 
favoured by the Admiralty. As time went on, and the public 

• " Naval Annual, 1912," p. 81, where the following figures are given : — 

Britain. Germany. 
March 31, 1912 .... 18 .... 9 

„ 1913 .... 28 .... 1* 
„ 1914 .... 34 .... 17 

30 



agitation subsided, Mr. Mulliner's soul burned within him. 
But the appetite of the Jingo Press was, for the moment, 
sated. The Times told him plainly (January 5, 1910) that 
his " diary," directed against the Government, was " some- 
what less than just, and not a little misleading." But the 
unpardonable, the fatal thing for Mr. Muiliner was his avowal 
of the authorship of the scare, and, in particular, of his visit 
to Downing Street ^Ministers may have to bow to a storm 
originated by the armament traders ; but they could never 
consent to have the true history of such an episode pubi>>cly 
advertised. Mr. Muiliner was politely warned oS. He had 
vindicated his right to a niche in otir political history, at the 
cost of his post. He retired with compensation, and was 
succeeded as managing director by a man of greater dis- 
cretion. Kear-Admiral E. H. S. Bacon, C.V.O., D.S.O., 
approached these matters with a complete knowledge of 
oflQcial traditions, for after being first Captain of the Dread- 
nought, he was Naval Assistant to the First Sea Lord, and 
from 1907 to 1909, Director of Naval Ordnance and 
Torpedoes. Under him, the Ck)ventry Company has 
received heavy Government orders and has increased its 
capital from a £1,000,000 to £1,400,000.* From which, we 
may see that a successful agitator must sometimes be con- 
tent to k^ep his mouth shut, and that there is more than one 
reason why high officials go into this particular ta:ade. 



XI.— CONCLUSION. 

To sum up : The great bulk of the so-called defence 
expenditure of the British Empire goes into the hands of 
private profit makecs. It is an immensely large and lucra- 
tive trade. It consists of companies and oombines, the 
strongest of which are closely allied, and compete less and 
less. It is essentially, and is becoming more and more, a 
cosmopolitan trade; its owners' nationalist pretentions are, 
therefore, rank humbug. It employs the usual touting arts 
of commerce; but it also manufactures two special kinds of 
opportunity : — (1) The flotation of new types of arms, which 
result in enormous " scrapping" of existing material; and 
(2) The international scare, of which the Muiliner " crisis " 

•At the annaal B»««ting of Jofaa Browm aad Co., on Jnlj 1, 1913, Lord 
Aberconway said : " Coventry was improving, bnt it was a great drag on their 
finances, and wou4d be for some time. Tbe plAoe was now fnHy recognised by 
the Goverarnent as an essential part of the natkmal armament workis. Last 
aotumn he went over the Scotson works, where they made the heavy naval 
mountings, with Mr. Winston Ctwrchfll. who gave him an assorance — wtiich be 
had carried out — that Corentry would now be regarded slb one of the roost 
important supplying firms for toe GovemmeDt, instead of t^lng coid-sfaoaldered, 
as it was for mani' years past." — (.Tinea report.) 



31 

J^21680 



m 1909 is a type. It is these two processes which' 
mainly account for the ruinous level of our present national 
expenditure. In the person of retired military, naval, and 
civil servants of the highest rank whom it employs, the 
trade possesses secret information supposed to be available 
to the heads of the G-overnment alone. And it is so firmly 
entrenched in the governing class of the country that no 
Ministry has yet dared to make a serious effort to dislodge it. 

Such is the modern trade of arms ; and I will add only one 
word about it. If British Democracy does not soon find a 
way of destroying this Hydra, it will destroy Bri^-ish 
Denjocracy. 



Tlie Haiioaal Labosr Prees, Ltd., Manchester and Loaien. 

32 



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